Thursday, May 25, 2006

401(K) Plans - Can You Afford to Retire

The portion of the recently aired PBS special, “Can You Afford to Retire” which captured the heart of the issue for me was the footage showing the faces of the plan participants who were sitting through a traditional 401(k) enrollment meeting. Their blank expressions, as they were being told they were responsible for their own investment futures, were very reflective of why participant directed investment programs will continually lead to suboptimal results.

Perhaps, instead of running traditional enrollment meetings, Plan sponsors should present the PBS special “Can you Afford to Retire” to their participants. The program is available on line. While the program may not have presented a truly balanced portrait of the issues involved in the retirement dilemma, it will certainly elicit a strong emotional reaction from viewers. This would help overcome some of the disinterest and inertia that pervades so much 401(k) participant behavior today.

This approach, in conjunction with product solutions such as target retirement funds, which make investment diversification and reasonable asset allocation available to everyone, could bring the average 401(k) plan participant much closer to where their retirement goals.


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